Fiat-Chrysler’s deal on CO2 with Tesla: is it legal?
On Monday Fiat-Chrysler baffled Europe when an article in the Financial Times revealed that it had made a deal with Tesla to ‘pool’, so the electric cars of the latter will be counted as CO2 credits in the FCA fleet. Goal is to avoid huge EU fines in 2021. The big question is: is it legal?
It would be the same as someone being caught speeding at 150 km per hour on the highway and make a deal with an other, exemplary driver without penalty points, to avoid losing your driver’s license and the huge fine, French newspaper La Tribune writes.
Flaw in EU regulation
Hervé Biard, lawyer specialized in commercial legislation at Cornet Vincent Ségurel, points at a very important clause in the EU regulation about “a certificate of compliance with Community legislation”.
With this clause it is enough for Fiat-Chrysler to import one Tesla on EU territory, without even registering it to be taken into account. In other words, Fiat doesn’t need to build the vehicle, neither it has to commercialize it. Just import it and stock it somewhere will do to make it legal.
Take advantage of best options
FCA not even tries to conceal its intentions to use this ‘flaw’ in European law. “We are going to take best advantage of the options in the legislation to respect standards”, FCA declared to French press agency AFP.
“The EU has allowed that ‘pools’ are formed, even in an informal way without an ownership relationship existing”, Biard remarks. “The Commission even hasn’t the right to inspect the pool agreement, because it’s a relation between parties in a matter of private law and confidential.”
New legislation or investigation
“But on the other hand the Commission could issue new legislation before the current rules apply or it can start an investigation on suspicion of abuse of law”, Biard adds. In other words, if the Commission wants to foil FCA’s plans, it perfectly can.
According to Hervé Biard it’s not unthinkable that FCA and Tesla have a silent, non-official approval by the Commission. There are major economic interest involved and the car industry lobby has undoubtedly put a lot of pressure on Brussels not to bolt the CO2 regulation to much.
The fines Europe foresees from 2021 on, are astronomic. For every gramme of CO2 above the 95 g/km limit a car manufacturer will have to pay a 95 euro fine per vehicle sold. Avoiding these fines has become a priority for all car manufacturers. Some, like PSA have even set up a special task force for it.
Car data provider Jato Dynamics has recently made a projection of what kind of fines car makers would have to pay, if the measure was applied already for their 2018 model range. For Volkswagen, being currently 26,6 g above the 95 g/km limit, that could mean 9 billion euro.
French PSA would have to pay a 5,4 billion euro fine with 23 g above limit. FCA would get an invoice of 3,24 billion euro. But other than FCA, Volkswagen and PSA are about to launch a fleet of electric and hybrid cars.
Tesla’s breakdown assistance
The Italian-American group has invested 9 billion euro in electrification, but the first models won’t arrive before late 2020. But it won’t be enough just to have a number of electric models.
They need to represent a sufficient share of new car sales. At least 5 to 7% as experts say. FCA knows it won’t make it and prefers to pay ‘hundreds of millions of euro’ instead to Tesla to deliver a ‘breakdown service’ in Europe.
To give an example: even the Renault-Nissan-Mitsubishi Alliance, that is on the forefront of electric cars within the classical car manufacturers, would have to pay a 3,6 billion euro fine, according to the Jato calculations based on 2018. But they will likely have no problem to clear the hurdle.